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Revision of Federal Speculative Position Limits

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Commodity Futures Trading Commission.


Final rule.


The Commodity Futures Trading Commission (Commission) is amending Commission regulation 150.2 to increase the speculative position limit levels for all single-month and all-months-combined positions subject to such limits. In addition, the Commission is making other clarifying amendments concerning the aggregation of positions when a Designated Contract Market (DCM) trades two or more contracts with substantially identical terms, and is deleting several obsolete provisions in part 150 that relate to contracts that are no longer listed for trading or to DCMs that no longer exist.


Effective June 10, 2005.

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Clarence Sanders, Attorney, Division of Market Oversight, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, NW., Washington, DC 20581, telephone (202) 418-5068, facsimile number (202) 418-5507, electronic mail; or Martin Murray, Economist, Division of Market Oversight, telephone (202) 418-5276, facsimile number (202) 418-5507, electronic mail

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I. Background

On March 15, 2005 (70 FR 12621), the Commission published proposed amendments to Commission regulation 150.2 to increase the speculative position limit levels for single-month and all-months-combined positions for CBT Corn, Oats, Soybeans, Wheat, Soybean Oil, and Soybean Meal; MGE Hard Red Spring Wheat; KCBT Hard Winter Wheat, and NYBOT Cotton No. 2.[1] The spot month limits for all of these commodities would remain unchanged. The Commission also proposed to clarify in regulation 150.2 its practice of aggregating traders' positions for purposes of ascertaining compliance with Federal speculative position limits when a DCM lists for trading two or more contracts with substantially identical terms based on the same underlying commodity characteristics. Finally, the Commission proposed to delete several obsolete provisions in part 150 that relate to contracts that are no longer listed for trading or to DCMs that no longer exist.[2]

II. Final Rules

The Commission is adopting as final rules without additional amendment the revisions to the speculative position limit levels that were set forth in the proposed rulemaking. This action is based upon its experience in administering these limits and after carefully considering the comments received in response to the notice of proposed rulemaking.

Thirteen comment letters were received in response to the proposed rulemaking, all but one of which was in favor. Favorable comments were submitted by representatives of agricultural trade or producer organizations, in particular the American Farm Bureau Federation (AFBF) and the National Farmers Union (NFU) who filed a joint statement, the National Grain Trade Council, and the National Grain and Feed Association; two DCMs, the Minneapolis Grain Exchange and the Chicago Board of Trade; and several entities representing the views of hedge fund managers, particularly the Managed Funds Association, Eclipse Capital, Campbell & Company, Rotella Capital Management, Chesapeake Capital Corporation, John W. Henry & Co., and Graham Capital Management. Most of the favorable comments supported the proposed higher limits as a desirable interim step towards the ultimate abolition of Federal limits, although the AFBF and NFU supported both the higher limits and the continued retention of Federal limits indefinitely. In this regard, as the Commission noted in its proposed rulemaking, while the Commission has determined at this time to retain Federal speculative position limits at the increased levels contained herein, the Commission intends to continue its review of its current policies regarding the administration of speculative position limits, including a further evaluation of the merits of retaining Federal speculative limits.

The American Cotton Shippers Association (ACSA) opposed the proposed increase in the single-month and all-months combined limits for cotton. In particular, ACSA noted that the NYBOT has proposed, in consultation with its cotton committee, the establishment of its own, exchange-set speculative position limits for the cotton No. 2 futures and option contracts. The NYBOT's proposed limits of 2,500 futures-equivalent contracts for single months and 4,000 futures-equivalent contracts for all months combined are lower than those to be adopted by the Commission in this rulemaking. Accordingly, ACSA expressed the view that the Commission should adopt in part 150 of the Commission's regulations the NYBOT's proposed lower levels.[3]

The Commission has taken this view into account but nevertheless believes that the limit levels it has proposed for the NYBOT cotton No. 2 futures and option contracts under part 150 of the Commission's regulations are appropriate and that no change from its proposed rulemaking is necessary for several reasons. First, the Commission has applied consistent criteria in setting Federal speculative limits for all commodities subject to those limits, and it believes that it should continue this policy. Accordingly, the all-months-combined speculative position limit levels adopted herein, including the limit for the cotton No. 2 futures contract, were set according to the Commission's long standing and well-established formula that takes into Start Printed Page 24706account open interest levels in the underlying futures and option markets, and the single-month levels adopted herein for each commodity were set to maintain the existing ratio between all-months-combined and single-month levels. In addition, the Commission notes that most comments made to the proposed rulemaking endorsed the Commission's approach for setting the single-month and all-months-combined speculative position limit levels. Finally, the Commission notes that DCMs may set speculative position limits at levels lower than Commission-specified levels, and that such lower levels would necessarily apply to all position holders. Thus, for the cotton No. 2 contracts, the applicable limits would be the lower levels that the NYBOT proposes to adopt, consistent with the comments expressed by the ACSA. In this regard, it is the Commission's expressed policy to review and approve, where appropriate, all speculative position limit provisions adopted by DCMs, and furthermore that a violation of contract market position limits that have been approved by the Commission is also a violation of section 4a(e) of the Act.[4]

In addition, the Commission is making other clarifying amendments concerning the aggregation of positions when a Designated Contract Market (DCM) trades two or more contracts with substantially identical terms. No comments were received in opposition to this clarification.

III. Related Matters

A. Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq., requires Federal agencies, in proposing rules, to consider the impact of those rules on small businesses. The Commission believes that the rule amendments to raise Commission speculative position limits would only impact large traders. The Commission has previously determined that large traders are not small entities for purposes of the RFA.[5] Therefore, the Acting Chairman, on behalf of the Commission, hereby certifies, pursuant to 5 U.S.C. 605(b), that the action taken herein will not have a significant economic impact on a substantial number of small entities. The Commission also notes in this regard that the final rules will raise speculative limit levels and thereby reduce the regulatory burden on all affected entities.

B. Paperwork Reduction Act

The final rule and its associated information collection requirements have been reviewed and approved by the Office of Management and Budget pursuant to the Paperwork Reduction Act of 1995, 44 U.S.C. 3507(d), under control numbers 3038-0009 and 3038-0013. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number. In the notice of proposed rulemaking, the Commission estimated the paperwork burden that would be imposed by the rules and sought comments on the estimates. No comments were received in response to this request.

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List of Subjects in 17 CFR Part 150

  • Agricultural commodities
  • Bona fide hedge positions
  • Commodity futures
  • Cotton
  • Grains
  • Position limits
  • Spread exemptions
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In consideration of the foregoing, pursuant to the authority contained in the Commodity Exchange Act, the Commission hereby proposes to amend part 150 of chapter I of title 17 of the Code of Federal Regulations as follows:

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1. The authority citation for part 150 is revised to read as follows:

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Authority: 7 U.S.C. 6a, 6c, and 12a(5), as amended by the Commodity Futures Modernization Act of 2000, Appendix E of Pub. L. 106-554, 114 Stat. 2763 (2000).

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2. Section 150.2 is revised to read as follows:

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Position limits.

No person may hold or control positions, separately or in combination, net long or net short, for the purchase or sale of a commodity for future delivery or, on a futures-equivalent basis, options thereon, in excess of the following:

Speculative Position Limits

[In contract units]

ContractSpot monthSingle monthAll months
Chicago Board of Trade
Corn and Mini-Corn 160013,50022,000
Soybeans and Mini-Soybeans 16006,50010,000
Wheat and Mini-Wheat 16005,0006,500
Soybean Oil5405,0006,500
Soybean Meal7205,0006,500
Minneapolis Grain Exchange
Hard Red Spring Wheat6005,0006,500
New York Board of Trade
Cotton No. 23003,5005,000
Kansas City Board of Trade
Hard Winter Wheat6005,0006,500
1 For purposes of compliance with these limits, positions in the regular sized and mini-sized contracts shall be aggregated.
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Issued by the Commission this 6th day of May, 2005, in Washington, DC.

Jean A. Webb,

Secretary of the Commission.

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1.  Commission regulation 150.2 imposes three types of position limits for each specified contract: a spot-month limit, a single-month limit that applies to each non-spot month, and an all-months-combined limit.

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2.  Commission regulation 150.2 currently includes Federal speculative position limits for agricultural commodities traded on the MidAmerica Commodity Exchange (MidAm) and for the white wheat futures contract traded on MGE. These provisions relating to the MidAm and the MGE white wheat futures contract are obsolete and will be repealed as part of this action. In addition, reference to the New York Cotton Exchange is being changed to NYBOT to reflect a change in corporate organization.

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3.  In an August 3, 2004, letter, the NYBOT submitted for Commission approval proposed speculative position limit rules for the cotton No. 2 futures and option contracts pursuant to Section 5c(c)(2) of the Commodity Exchange Act, and Commission regulation 40.4. At that time, the NYBOT also agreed to extend the Commission's time to review and approve the amendments until such time as the Commission should implement amendments to Commission regulation 150.2.

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4.  See Appendix B to part 38 of the Commission's regulations, pertaining to Acceptable Practices under Core Principle 5 for DCMs.

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5.  47 FR 18618 (April 30, 1982).

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[FR Doc. 05-9383 Filed 5-10-05; 8:45 am]